The instability of the correlation structure of the S&P 500

Using weekly returns of S&P 500 constituents, we study the time-varying correlation structure during the period of 2006 to mid-2011. Contrary to most of the previous correlation studies of many assets, we do not use rolling correlations but the DCC MV-GARCH model with the MacGyver strategy proposed by Engle (2009). We find empirical evidence that the correlation structure tends to change significantly during the periods of high volatility and market downturns.

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Year of publication:	2011-10-17
Authors:	Lyócsa, Štefan ; Výrost, Tomáš ; Baumöhl, Eduard
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	correlation structure \| dynamic conditional correlations \| range-based volatility \| conditional volatility \| MacGyver strategy

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Extent:	application/pdf
Series:	MPRA Paper.
Type of publication:	Book / Working Paper
Classification:	C32 - Time-Series Models ; G1 - General Financial Markets
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009325633